Theme 1 GCSE Business 1.3 Putting a Business Idea into Practice

Aims

What the business is trying to achieve, for
instance, increase market share.

Objectives

The targets that help businesses reach their aims, such as, conducting market research to find out what customers want.

Financial Objectives

Objectives that focus on generation of profit eg Sales Maximisation

Survival

The objective set when your business is new or just trying to make it through each day.

Market Share

The proportion of sales in a market that are taken by one business

Profit

Revenue - Total Costs
The money you have left once you have paid all your costs.

Non-financial Objectives

Objectives that focus on things other than generating profit eg providing employment for others

Social Objectives

Objectives that are set to try and make things better eg reducing carbon emissions

Personal Satisfaction

Setting up a business to allow you to feel good about yourself

Independence

Setting up a business so you get to make all your own decisions

Revenue

The income received from sales.

Fixed Costs

Costs that do not change with the level of production such as rent.

Variable Costs

Costs that change directly with the level of production such as buying raw materials.

Total Costs

Fixed Costs + (Variable Costs x Quantity)

Loan

Borrowing a sum of money which is then repaid over a period of time with interest.

Repayments

The monthly payments on a loan.

Interest Rates

The reward you get from the bank for saving with them and the price you have to pay for borrowing from them.

Breakeven Point

The level of output where total revenues = total costs. No profit and no loss is made at this point.

Breakeven Formula

Fixed Costs / (Selling Price - Variable Costs)
Think Father Christmas and what he brings over!

Margin of Safety

The amount of output between the actual level of output and the breakeven output

Margin of Safety Formula

Actual output - breakeven output

Cashflow Forecast

A prediction of how much cash will flow through the business.

Cash Inflows

The cash flowing into a business, such as
revenue. Also called receipts.

Cash Outflows

The cash flowing out of a business, your costs. Also called payments.

Net cashflow

The difference between cash inflows and cash outflows. (Or receipts - payments). If it's negative the business may have a problem.

Opening Balance

The amount of money a business has at the start of the month.

Closing Balance

The amount of money a business has at the end of the month.

Insolvency

When a business no longer has enough money to pay its bills and will need to stop trading.

Overdraft

Where the bank allows you to spend more than you actually have in the bank. It's a short term loan that will be paid back with interest.

Trade Credit

Where suppliers allow you to buy now and pay later.

Savings

Money that has been set aside by the owner to invest in their business.

Retained Profit

Profit which is kept back by the business and will be used to pay for future investment.

Loans

Borrowing a sum of money which is then repaid over a period of time with interest.

Venture Capital

Finance from someone who invests in a higher risk business for a share of the equity or profit.

Share Capital

The money raised from selling shares to shareholders.

Crowd Funding

Funding a project by raising money from a large number of people who each contribute a relatively small amount, normally on the Internet.

Short term sources

Sources of money that need to be repaid quickly eg trade credit.

Long term sources

Sources of money that are borrowed or invested for longer than a year, for instance a loan.